As expected, Dell confirmed this morning that it recieved two new acquisition offers, one from billionaire corporate raider Carl Icahn and the other from investment fund Blackstone Group.
During Dell’s “go shop” period, Icahn and Blackstone put in preliminary bids late last week. Dell set a deadline of Friday for offers and this sparked a bidding war that could overturn founder Michael Dell’s plans to take the company private with private equity firm Silver Lake and some help from Microsoft.
Both of the new proposals offer shareholders more money than the Dell/Silver Lake plan.
The Silver Lake plan would take Dell private for $13.65 per share and leave Dell in control of the company he started with $1,000 when he was 19 years old. Dell’s board said that to get to this price, Silver Lake Partners raised its bid six times by a total of about $4 billion, or over 20%, during the course of negotiations.
In comparison, Icahn offered to inject $5 billion into Dell and pay $15 per share. The company would remain public under new leadership.
Blackstone offered shareholders “greater than” $14.25 per share if they wanted to sell, but they could hold onto their shares if they wanted to. With this plan, Dell would remain public, but Blackstone would cap the amount of stock that would be outstanding.
Here’s the relevant parts of the two proposals. The full text of each can be found here.
Proposal from the Blackstone Management group:
Our Acquisition Proposal contemplates a leveraged recapitalization transaction with the following features:
- Shareholders who wish to receive cash will have the opportunity to receive greater than $14.25 in cash per share for all of their shares.
- Shareholders who wish to participate in the ongoing upside of the company will have the opportunity to remain as shareholders and receive shares (subject to a cap) valued in excess of $14.25, which shares would continue to be publicly traded on the Nasdaq.
Proposal from Icahn Enterprises:
Dell will obtain transaction funding composed of the following:
- $2 billion investment ($1 billion by Icahn Enterprises and $1 billion by Carl C. Icahn and his affiliates other than Icahn Enterprises) for the purchase of common shares of the Surviving Company (in addition to the shares currently owned by Icahn Enterprises and its affiliates) at a price of $15 per share, resulting in an additional 133 million shares being issued by the Surviving Company. As contemplated in the fifth bullet item below, Mr. Icahn and his affiliates other than Icahn Enterprises, are willing to commit an additional $2 billion of cash equity financing, for an aggregate $5 billion total equity commitment to this Acquisition Proposal.
- $7.4 billion of cash currently available at Dell.
- $1.712 billion in new factoring receivable facility (total factoring receivable facility of $3.0 billion).
- $5.218 billion in new debt. …
Dell shareholders will be entitled to elect to receive either: (x) shares of the Surviving Company on a one-to-one basis with their current holdings; or (y) an aggregate of up to $15.65 billion in cash (the “Payment Funding”) payable at a rate of $15 per share. If the Payment Funding is fully utilized this would result in 1.043 billion shares (58.1% of the current outstanding) being subject to the Proposed Merger.
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